Happy Easter market watchers!  

He is Risen! This is one of my favorite seasons of the year on many fronts.  

It does seem warmer and greener earlier this year versus recent years and the heat has been on.  Cooler temperatures do return next week with rain chances sweeping across Oklahoma through Missouri with varied levels of coverage across Texas, Kansas up into Nebraska and much of the corn belt.  Models have shifted further east with western Kansas and Colorado missing much of the precipitation over the next 10 days.  
 

Drought severity is spreading across western Oklahoma and Texas and the High Plains. Nearly 85 percent of Kansas is in drought, over 97 percent of Nebraska and 100 percent of South Dakota.  No wonder we’ve seen such volatility, but lows holding across the wheat complex in recent weeks as dry conditions persist despite some isolated storms.  

This week’s USDA winter wheat ratings decreased by one percentage point to 47 percent Good-to-Excellent as expected, but down from 55 percent last year.  At a state level, Kansas declined 8 percent week-over-week to 43 percent while Nebraska reduced 7 percent to only 30 percent G/E versus 70 percent last year.  Colorado was down 6 percent G/E to 57 percent, higher than last year’s 53 percent. Texas was down 2 percent to 23 percent versus 48 percent last year.  Oklahoma was the bright spot with conditions improving 2 percent over the prior week to 44 percent, but down from last year’s 60 percent.  
 

Let’s hope weekend and next week’s rains are fruitful to upgrade these conditions although next Monday’s crop conditions updates will be too soon to reflect any major changes.  We will now get weekly updates on winter wheat conditions as well as corn, soybean, cotton, spring wheat and oat plantings.  

Corn planting is now 4 percent complete, behind the 6 percent expected and last year’s pace.  Soybean plantings were pegged at 2 percent complete, just one percent behind expectations and last year.  Wetter weather is expected to bring more delays to corn and soybean plantings in the weeks ahead.  However, as we know, with the scale of equipment on today’s farms can get acres planted quickly and so be cautious of any planting premium in the market lasting for very long barring any overly extended delays.  

We’ve seen an impressive rally in new crop December corn and November beans in recent weeks with potentially more to come.  US exports of corn and soybeans have been strong recently amid continued tariff rhetoric that could be artificially boosting near-term sales for fear that the situation could continue to deteriorate.  Continued weakness in the US dollar have also helped price competitiveness to overseas buyers.  

Markets were closed Friday for Good Friday and my daughter’s 3^rd birthday!  Thursday’s closes put in inside day on the charts across corn contracts and old crop soybean contracts while new crop November beans touched the 200-day moving average, coming within a ¼ cent of the April 1^st high, but closed well off the highs.  
 

NOPA crush for March was released Tuesday and came in lower than expected.  Soybean oil stocks were sharply lower than expected.  If demand holds, there will be demand to rebuild these stock levels will be rebuilt incentivized through higher prices.
 

In South America, Brazil’s soybean harvest is nearly complete, in line with the average pace while Argentina’s soybean harvest is off to a slow start.  Brazil’s first crop corn harvest is also finishing up and in line with the average pace as is the Argentine harvest.  With Brazil’s burgeoning ethanol industry, corn production there is increasingly diverted to biofuels and tightening supplies for the export market.  That could be good news for US exporters although Brazil continues to develop more capacity for agricultural production.  

With the US trade war escalation with China at an all-time high this week, US exporters need improved odds to keep Chinese buyers engaged.  With tit-for-tat tariffs pushing US tariffs on China to 145 percent last week and Chinese tariffs on US products to 125 percent, President Trump signed an Executive Order this week to elevate total tariffs on Chinese products to 245 percent.  This is unlike anything the market has ever seen. 

Fed Chair Powell this week also commented that these levels among other levels were even higher than the outside bounds of potential scenarios.  Chair Powell also commented on the risk of higher inflation if tariffs remain in place as we are all concerned is coming and already here in some cases.  Even domestic products that compete with imports are already getting a tariff premium added to fill the arbitrage gap. 

Last week’s CPI came in lower than expected with core at a 4-year low, but the current trade war makes the decision of an interest rate cut that much murkier.  The next FOMC meeting is May 6-7^th.  

Discussion of a trade deal with Japan brought some hope back to markets late in the week, but still overshadowed by the tremendous uncertainty of the current situation and what could happen next.  As a client mentioned this week, it may be easier to predict the market than Trump’s next move.  

The cattle markets made an impressive recovery this week amidst the growing uncertainty of the trade war and US consumer strength.  Both the feeder and fed cattle futures closed higher for 5-consecutive sessions.  The chart gaps above that were created on the major tariff reciprocal tariff announcements have now been filled with chart gaps now below from the strong recovery. April feeder futures and options finished trading on Thursday and closed very strong at $293.325.  Fed cash cattle topped out this week at $210 in Texas and Kansas and $212-214 in Nebraska. 

USDA released its monthly Cattle-on-Feed report Thursday at 2 PM CDT, after the close.  April 1^st on-feed came in at 98.4 percent, marginally higher than the expectation at 98.2 percent.  March placements were the biggest surprise coming in at 105.1 percent, higher than the expected 103.4 percent.  Marketings for March came in at 101.1 percent, slightly higher than the expected 100.79 percent.  
 

While the cash markets for calves, feeders and fed cattle continue to remain incredibly firm, these on-feed report figures have somewhat of bearish bias.  After the recent rally that filled the chart gaps above, I wouldn’t be surprised if we see some weakness in futures next week. However, this also assumes that the tariff uncertainty remains and there is not a sudden deal with key trade partners. Last week’s 90-day extension of reciprocal tariffs on countries that didn’t retaliate brought about a strong rebound in equity and all markets, but was then followed by a selloff.  Having said that and as long as the consumer can continue to afford it which is questionable, these tariffs are bullish for the beef market given that it further restricts and increases price on imports and there is a staggering amount of beef imported into the US given the supply and demand imbalance that is further tightened by trade restrictions on imported products.  

There is a lot of confusion and indecision taking place in the current environment.  Businesses are delaying capital expenditures, which translates to purchases throughout the economy.  The US economy saw negative GDP growth in the first quarter and consumer weakness is a primary concern for all businesses and investors.  Consumer sentiment continues to weaken, but a sudden change in trade policy could reverse this on a dime.  

Stay risk aware, but producers, please don’t allow big profit opportunities to disappear. Protecting profit margin isn’t free, but it is far cheaper than getting caught in a situation where markets turn much lower than expected for longer when you had the opportunity to protect it for your operation.  

Sidwell Strategies is the one-stop shop to protect cattle with futures, puts, LRP or a combination of all, which is probably the best strategy overall.  If you’re ready to trade commodity markets, give me a call at (580) 232-2272 or stop by my office to get your account set up and discuss risk management and marketing solutions to pursue your objectives.  Self-trading accounts are also available.  

It is never too late to start and there is no operation too small to get a risk management and marketing plan in place.  

Wishing everyone a successful trading week!  Let us know if you'd like to join our daily market price and commentary text messages to stay informed!

Brady Sidwell is a Series 3 Licensed Commodity Futures Broker and Principal of Sidwell Strategies.  He can be reached at (580) 232-2272 or at brady@sidwellstrategies.com.  Futures and Options trading involves the risk of loss and may not be suitable for all investors. Review full disclaimer at https://www.sidwellstrategies.com/fccp-disclaimer-21951.